What will e-Commerce fraud prevention look like in 2018? Because the fraud landscape is evolving so quickly, the one sure prediction is that there will always be new challenges for merchants. But the rewards are worth the effort: the worldwide e-Commerce market was valued at $2.3 trillion for 2017, and 2018 should see even more growth. Here are three issues that will be front and center for online sellers in the year ahead.
The 2015 EMV transition in the U.S. led to a spike in Card Not Present (CNP) fraud. But two years after the EMV shift, fraud is still on the rise. The value of e-Commerce fraud in the U.S. alone is projected to rise from $10 billion in 2014 to roughly $19 billion in 2018. This explosive growth in CNP fraud puts it first among card fraud methods in the U.S., despite the fact that Javelin’s Fixing CNP Fraud study found that the transition to EMV will have a negligible effect on the volume of fraudulent e-Commerce in the United States through 2018.
If the EMV fraud bump is over, why is fraud on such an upswing? More merchants are selling internationally, giving fraudsters more opportunities to exploit cross-border fraud-prevention gaps. CNP fraud will continue to rise as long as U.S. e-Commerce does, according to the Javelin study. And, as old-fashioned as it may sound, fraudsters are increasingly using the telephone to commit CNP fraud on mail order telephone order (MOTO) orders. Pindrop Lab found that call-center fraud rose by 113% from 2015 to 2016. Why? Again, there are weaknesses that fraudsters can exploit, such as inadequate fraud-prevention training of customer service representatives and easy ways for thieves to mask or change their location data.
Challenge: Balancing Fraud Prevention With Customer Satisfaction
Today’s online shoppers expect an easy, low-friction shopping experience, and a growing number of them are making purchases on their smartphones. As m-Commerce gains ground on traditional desktop e-Commerce, mobile payments fraud is rising, too. LexisNexis’ annual True Cost of Fraud survey for 2017 found that among merchants that offer mobile shopping, mobile fraud totals 2.6% of total revenue. To protect revenue and keep customers happy, merchants must understand that m-Commerce fraud prevention requires a different approach from desktop e-Commerce. Online shoppers are also increasingly interested in same-day delivery, which dramatically shortens the available window for merchants to identify fraud.
Challenge: More Fraud Collaboration And Sophistication
As identity theft and card fraud continue to be profitable for thieves, fraudsters are joining forces to share knowledge and leverage their own economies of scale. Small groups of thieves are giving way to international organized crime groups. These groups have the resources to use technology to infiltrate merchants’ computer networks to watch for and exploit security weaknesses and steal information. In the high-profile Equifax data breach, investigators found that hackers had spent roughly six months in the credit bureau’s system before detection.
Criminals have also found that it’s easy to create counterfeit credit cards with stolen data if they have the proper tools. And fraudsters are always looking for ways to beat new security technology. Biometrics — fingerprints, facial recognition, and typing and touch habits — seem as if they should be uniquely secure. For example, the angle at which a user holds a mobile device or the keyboard pressure recorded while typing can be used as biometric indicators that, when added up, can help identify the user. But some criminals have found workarounds for these customer-authentication tools, and it’s likely that those practices will spread.
Organized criminals are also increasingly exploiting weaknesses in transportation and shipping companies to commit e-Commerce fraud. In some cases, they scam shippers and merchants by calling the shipper after placing an order to reroute their delivery to a new location instead of the stolen-but-valid delivery address. In other cases, they cultivate corrupt contacts within the shipping companies to divert their fraudulently purchased packages to collect their stolen goods for resale.
These challenges mean that in 2018, e-Commerce merchants will need to have good fraud controls in place for newer channels like mobile shopping as well as older channels like telephone orders. Network security will be increasingly important as fraudsters try to get into retail systems to steal customer data. And a multi-layered approach to customer recognition will be key in the fight against organized crime’s new and technologically sophisticated fraud tactics. Finding ways to meet these challenges is a matter of business survival as the global e-Commerce market continues to grow.
Rafael Lourenco is the VP of U.S. Operations at ClearSale, a Card-Not-Present fraud prevention operation that protects e-Commerce merchants against chargebacks. The company’s flagship product, Total Guaranteed Protection, is an end-to-end outsourced fraud detection solution for online retailers. Follow on twitter at @ClearSaleUS.